One of Australia’s largest iron ore producers is accelerating plans to phase out fossil fuels, as geopolitical tensions continue to drive up oil prices.
The Andrew ‘Twiggy’ Forest-controlled Fortescue Metals Group expects to save $US100 million ($A141 million) in fossil fuel costs by 2027.
The latest push by the Perth-based company comes as a lobby group warns more than 80 per cent of Australian businesses are facing higher operating costs due to the global fuel crisis.
The crisis began on February 28 when the US attacked Iran, sending the price of Brent crude to a recent peak of $US119.50 a barrel, from $US60 at the start of the year.
Even if oil supply issues abate, the price of crude is unlikely to return to $US60 any time soon, with most market economists pointing to a price around $US80 in the coming months.
“Businesses will remain on edge until there is a clear and lasting end to the conflict,” Australian Chamber of Commerce and Industry chief Andrew McKellar said on Friday.
“Even if hostilities pause, disruptions to oil supply will have lasting consequences in many industries.”
Fortescue is building what it describes as the world’s first industrial and fully integrated green-energy grid, eliminating the need for diesel and fossil fuels.
It announced on Friday that by the end of 2027, the system will be powering all of its operations for 24-hour periods without fossil fuels – ahead of its previous 2030 target.
Fortescue expects its Pilbara green grid to be completed by the end of 2028.
“As global energy supply chains become increasingly unstable, and the massive risks of fossil fuel dependence are exposed, Fortescue is … proving industry can power itself,” it said.
Fortescue is pursuing a mix of green energy solutions, including wind, solar and battery infrastructure.
The Australian chamber’s survey of almost 2300 respondents, taken from March 24 to April 2, shows other businesses are at the mercy of fuel prices, which have pushed up freight and transport costs.
It found 61 per cent are absorbing higher fuel costs rather than passing them on to consumers following the outbreak of the war in the Middle East, which has raged for almost six weeks.
As a result, 44 per cent were experiencing cashflow issues and a similar number were facing reduced consumer spending
As margins shrink, 55 per cent said they had reduced essential spending, and nearly a third have put investment or expansion plans on hold.
World equity markets remain on the back foot, with most stock indices – including Australia’s S&P/ASX200 – down by up to eight per cent from record highs about a month ago.
“While a pullback or even a short bear market has been widely expected … its extent appears at the mercy of how quickly supply chains can normalise,” Bendigo Bank chief economist David Robertson said.
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